Property Management LLC in HI owned by a WY LLC

[Ashish G.]

Hi

I am trying to figure out what triggers foreign entity registration in HI? Can you help with below scenarios:

1. HI LLC does property management and is registered as Member Managed with WY LLC as 100% owner.

2. HI LLC does property management and is registered as Manager Managed with WY LLC as the sole manager.

Taxation: HI LLC is disregarded and WY LLC is setup as S-Corp. 

Thanks

[Amanda Breck]

Hi Ashish, this is a great question! 

Typically an LLC or other business entity needs to foreign file in another state when it is doing business in that state. An LLC will be considered to be doing business in a state if your business has a significant presence or conducts substantial business activities in that state, beyond just occasional sales or isolated transactions.

In both scenarios you describe, the WY LLC is not doing substantial business in another state. It just owns an entity in another state and signs on behalf of it. The HI LLC is the entity actually doing business in either scenario. There is no requirement here to foreign file the WY LLC.

Whenever possible, it is best to keep a WY LLC registered only in WY, as the benefits the state offers often are no longer available if the entity is filed in another state.

One complication you might run into is with the s-corp status. With an s-corp, if you are taking a reasonable salary or any reimbursements, it needs to be registered in the state where you are located. Paying you in these manners would be considered doing business in a state. If you are located in HI, then you would need to register the WY LLC taxed as an s-corp in HI.